Slide 9 of 25
- As you might have deduced from the discussion on generally low petroleum stocks, distillate stocks are low.
- Stocks had been dropping since August 1999 as world petroleum inventories were declining. Still, at the end of November they were well within the normal band. But in December, stocks dropped below the normal band and have not fully recovered.
- As the normal stock band shows, we typically build distillate stocks during the summer for use during the winter.
- Refiners are now focusing on gasoline production, and with relatively low gasoline inventories, it is unlikely refinery yields will be tilted to distillate fuel oil versus the normal pattern during the summer gasoline season. If stocks follow their normal build pattern, we would begin the winter with below average stock levels.
- As was just evidenced in the gasoline market, below average stock levels translate to increased potential for price volatility.